Economic Commentary
Providing you with in-depth analysis of current economic and financial issues.
1998
- December 1998
- Subordinated debt: tough love for banks?
- Several recent proposals aim to restore market discipline to the banking sector by forcing banks to issue debt that is not guaranteed by the government, termed subordinated debt. This Commentary examines the reasoning behind such proposals and assesses the likelihood of their success. (PDF)
- November 1998
- Social Security’s treatment of postwar generations
- Social Security’s tax treatment of distinct groups varies widely among postwar generations: Women, whites, and the college educated have lower lifetime net tax rates than do men, non-whites, and those without a college education. Among income groups, the middle class faces the highest lifetime net tax rate (PDF)
- October 15, 1998
- Is the current-account deficit sustainable?
- How long can we service our growing international indebtedness without causing economic disruption? This explanation of the current-account adjustment process provides fundamental knowledge that will enable the reader to form opinions about the state of affairs and to estimate the probabilities of possible outcomes. (PDF)
- October 1, 1998
- Currency: Time for Change?
- Despite the increasing usage of credit and debit cards and the emergence of various electronic payment instruments, currency remains king - at least for small-dollar-value transactions. Maintaining the quality of Federal Reserve notes in circulation represents the single largest expenditure by Reserve Banks. This Economic Commentary examines the Federal Reserve’s current role in the provision of currency and explores the challenges and opportunities in developing forward-looking currency policies. (PDF)
- September 15, 1998
- What fiscal surplus?
- Proposals to shore up Social Security using future budget surpluses neglect to mention that Social Security itself produces these surpluses. Moreover, the projected budget surplus is dwarfed by Social Security’s present shortfall of $7 trillion-$10 trillion, which consists of the benefits that living adults will receive minus their payroll tax payments. This shortfall represents an addition to living adults’ wealth that has encouraged greater current consumption, lowered national saving, and widened trade deficits. (PDF)
- September 1, 1998
- Bank Notes and Stored-Value Cards: Stepping Lightly into the Past
- Like the bank notes that circulated in this country from 1863 to 1913, stored-value cards substitute the liabilities of private banks for government and central-bank liabilities. This shift may have important implications for the federal budget, the money supply, and monetary policy. (PDF)
- August 15, 1998
- Global ATM banking: casting the net
- ACH and ATM systems are examples of networks, where the benefits of one participant enhance the structure’s value for the other participants. Some recent results from economic theory suggest that competitive networks are preferable in a social sense to monopoly networks. (PDF)
- August 1, 1998
- Measuring Pricing Bias in Mortgages
- Detecting and measuring discrimination in the pricing of mortgage loans present unique challenges for bank regulators. This Economic Commentary outlines how loans are priced in the mortgage market and the difficulties involved in comparing the prices charged to different borrowers. (PDF)
- July 1998
- Productivity gains during business cycles: what’s normal?
- Labor productivity growth is generally acknowledged to be procyclical. The author reviews the leading explanations for this, then uses two approaches to compare the time pattern of productivity gains over the business cycle. One approach describes the pattern in terms of the number of quarters of growth since the cycle’s trough; the other uses knowledge about the ends of past recoveries to describe the typical pattern of productivity gains as a cycle ages. (PDF)
- June 1998
- Productivity measures and the "new economy"
- The U.S. economy’s recent extraordinary performance has led some to claim that trend output growth is accelerating to a much higher rate than any we have experienced in a quarter century; they also maintain that the signs of productivity’s acceleration have been masked by measurement problems. The authors, however, find scant evidence to support such claims. (PDF)
- May 15, 1998
- Government-subsidized training: a plan for prosperity?
- Many analysts believe that the United States should subsidize training to increase its workers’ skills because employers don’t provide enough. This Commentary asks whether the present level of training is truly insufficient, or whether firms’ incentives may already be in synch with the social costs and benefits of training. (PDF)
- May 1, 1998
- In search of the NAIRU
- The relationship between the unemployment rate and the nonaccelerating inflation rate of unemployment (NAIRU) is presumed to be an inflationary bellwether, but recent inflation predictions based on it have not been successful. The authors explore the reasons for this failure and suggest that it may be time to replace the NAIRU. (PDF)
- April 15, 1998
- Generational equity and sustainability in U.S. fiscal policy
- If U.S. spending goes as projected, future generations will give up almost half their lifetime labor income to balance the government’s books. After showing that current policy is not sustainable, this article reports the size and timing of the changes necessary to make it so. (PDF)
- April 1, 1998
- Private Money: Everything Old Is New Again
- Private money systems have existed in this country for 200 years or more. Wherever they are used, they must solve problems similar to those confronting innovative electronic money systems. This Economic Commentary suggests that the high-tech newcomers could benefit from the experience of the low-tech veterans. (PDF)
- March 15, 1998
- What happened to the inventory overhang?
- The large inventory buildup in the first half of 1997 led to media warnings of a substantially weaker economy by year’s end. The authors examine the rationale for these warnings, and argue that inventory accumulation is an unreliable predictor of future economic strength. (PDF)
- March 1, 1998
- Gold prices
- The price of gold commands attention because it serves as an indicator of general price stability or inflation. But gold is also a commodity, used in jewelry and by industry, so demand and supply affect its pricing and need to be considered when gold is a factor in monetary policy decisions. (PDF)
- February 15, 1998
- Network externalities: the catch-22 of retail payments innovations
- An investigation of one of the reasons why electronic payments have not yet supplanted cash and checks in retail transactions: Consumers’ willingness to use an innovation depends on the number of merchants who have already adopted it, and merchants’ willingness to invest in the innovation depends on the number of consumers who are already using it. (PDF)
- February 1, 1998
- Will increasing the minimum wage help the poor?
- Minimum wages help some families to escape poverty, but employment losses associated with raising the minimum also appear to cause some families to fall into poverty. The authors’ estimates suggest that on balance, the second of these effects outweighs the first; therefore, the net result of raising the minimum wage is an increase in the proportion of poor families. (PDF)
- January 15, 1998
- Assessing Fundamental Tax Reform
- President Clinton recently stated that he would consider legislation aimed at simplifying the U.S. tax code if it were fiscally responsible, fair to all Americans, good for the economy, and truly created a simpler tax system. This article looks at how some basic tax reform proposals - including the flat tax and an alternative known as the X tax - stack up against these sometimes competing criteria. (PDF)
- January 1, 1998
- A Hitchhiker’s Guide to Understanding Exchange Rates
- To understand the behavior of exchange rates, it is often useful to view them as consisting of two parts - a real exchange rate and a component reflecting domestic and foreign inflation differentials. Most important, however, is an appreciation of the crucial role that expectations play. (PDF)